UPDATE 1-Mexico passes law to combat cartel money laundering

MEXICO CITY, Oct 11 (Reuters) - Mexico's Congress onThursday approved a long-awaited law to crack down on moneylaundering in a bid to attack the finances of the country'spowerful drug cartels.

The law, proposed two years ago by outgoing President FelipeCalderon as part of his offensive against drug gangs, was passedby the Senate on Thursday. The lower house passed it earlierthis year.

The new federal law puts restrictions on cash purchases ofreal estate, jewelry, armored cars and other assets thatcriminals use to launder illicit funds.

Companies will be required to report large cash purchasesunder the law. Car sales of more than 200,000 pesos (about$16,000) and real estate purchases of more than 500,000 pesos(about $39,000) must be reported.

The bill carries a minimum penalty of five years in prison.

"There is an outcry from society to weaken the financialstructures of organized crime and that is what this law isabout," said Senator Roberto Gil, a member of Calderon'sconservative National Action Party.

Nearly 60,000 people have been killed since Calderonlaunched a military-led assault against drug cartels aftertaking office in late 2006.

Dozens of drug lords have been killed or captured since thenbut Calderon and the country's lawmakers have been criticizedfor not doing enough to attack finances of the cartels.

Sales of drugs from marijuana to cocaine and methamphetaminein the United States are worth about $60 billion annually,according to the United Nations. About half of that amount isestimated to find its way back to cartels in Mexico.

The scale of the country's money laundering problems leaptto global attention in July when a U.S. Senate report accusedbank HSBC of failing to keep tabs on shady deposits at itsMexican operation.

The report focused on $7 billion shipped by the bank fromMexico to the United States between 2007 and 2008. HSBC admittedit had failed to follow money laundering rules and paid 379million pesos ($29.45 million) in fines.

Hot money also has tainted everything from beauty pageantsto the Mexican presidential elections this year, where theInstitutional Revolutionary Party, known as PRI, ofPresident-Elect Enrique Pena Nieto was accused by rivals ofcampaigning using illicit funds. The charges were not proven.

"We have to stem the flow of dirty money in Mexico, whichhas been the main driver of the growing violence in thecountry," said Senator Arturo Zamora of the PRI.

Pena Nieto, who will return the PRI to power when he takesoffice in December, has said he will fine-tune the strategy toreduce violent crime linked to the drug war. [ID: nL2E8I432R]

The bill now goes to Calderon's office for ratification. Inorder to give authorities time to prepare to enforce the law, itwill take effect nine months later.

Zamora said estimates for the amount of illegal fundslaundered in Mexico range from about $10 billion a year to ashigh as $45 billion.